Hopes rise for Shire sale as Takeda CEO discusses case for deal

LONDON (Reuters) - Expectations that Takeda Pharmaceutical (4502.T) will bid for London-listed rare disease specialist Shire SHP.L before an April 25 deadline rose on Thursday after comments from the head of the Japanese drugmaker on the merits of a deal.

FILE PHOTO: Takeda Pharmaceutical's signboard is seen on its headquarters building in Tokyo, Japan January 30, 2018. REUTERS/Kim Kyung-Hoon/File Photo

The briefing by Takeda Chief Executive Christophe Weber for analysts fueled a 4 percent jump in Shire shares, valuing the company at around $48 billion - or $9 billion more than Takeda.

During the meeting, Weber discussed the strategic case for buying Shire and addressed concerns about the size of such an acquisition, which Takeda first announced it was considering last week.

The briefing was closed to the media and Takeda declined to confirm Weber’s remarks, but analysts said he had declared that size was no obstacle for any “mindful” acquisition and Shire could accelerate his company’s transformation.

In response to a question regarding a partial acquisition, Weber said Takeda was weighing a deal for all of Shire Plc. He also promised to maintain the dividend and the group’s investment grade rating, but said there was scope to increase debt, according to UBS and Bernstein analysts.

Takeda had already laid out the broad case for acquiring Shire in a statement on March 28 and a Takeda spokesman insisted nothing new was disclosed in Thursday’s meeting, in accordance with British takeover rules. Under the takeover code, Takeda has until April 25 to decide whether to make a bid.

Takeda investors have been skeptical about the merits of a Shire deal, given the size of the potential purchase and the likely need for a large share issue, which could be highly dilutive.

But Shire shareholders are impatient with their company’s recent disappointing performance, following the widely criticized acquisition of Baxalta for $32 billion in 2016, which has added to pressure on CEO Flemming Ornskov.

“The market does not like what Shire is doing, what it did with Baxalta, the fact it’s heavily geared and the strategy of the CEO,” said one top-30 investor. “A lot of shareholders would probably think if you get a credible bid for the business then ‘thank God’, and we can move on.”

A second investor said confidence in Ornskov had been eroded, increasing the likelihood of a deal if Takeda came up with a fair price.

U.S. drugmaker AbbVie in 2014 walked away from a planned $55 billion purchase of Shire after changes to U.S. tax rules that would have allowed it to take advantage of lower corporate tax rates overseas.

The AbbVie offer had valued Shire at more than 50 pounds a share, against a current share price of 37.50.

Bernstein said its survey of Shire investors suggested they wanted an offer of 42 pounds to start negotiations and 45 pounds to close the deal.

Additional reporting by Simon Jessop in London and Sam Nussey in Tokyo; Editing by David Holmes and Alexandra Hudson